NEXT FUEL, INC. 2012 TECHNOLOGY ACQUISITION EQUITY PLAN STOCK OPTION AWARD AGREEMENT

In consideration for the Award Options, Participant hereby:  (i) acknowledges receipt of the 2012 Technology Acquisition Equity Plan of the Company (the "Plan") and Schedules I and II to this Agreement, (ii) represents that Participant  has read and understands the terms and provisions of the Plan and Schedules I and II to this Agreement (including, without limitation, the provisions related to Forfeiture Activities (as defined in the Plan)), (iii) accepts this Award Options subject to all the terms and conditions of the Plan and Schedules I and II to this Agreement (including, without limitation, the provisions related to Forfeiture Activities (as defined in the Plan)) and (iv) agrees to comply with all the terms and conditions of the Plan and Schedules I and II to this Agreement (including, without limitation, the provisions related to Forfeiture Activities (as defined in the Plan)). Participant acknowledges that there may be adverse tax consequences as a result of this Award or the exercise of rights pursuant to this Agreement and that Participant should consult a tax adviser prior to accepting this Award or exercising any rights under this Agreement.

NEXT FUEL, INC.                                                                                     PARTICIPANT:

 

VESTING PROVISION:

 

Subject to the other terms and conditions of this Agreement and of the Plan, The Unvested Options shall vest and shall become Vested Options on the Vesting Dates and Associated Vesting Increments in the table below.  At each Vesting Date, the Unvested Options in the Vesting Increment associated with that Vesting Date as indicated above shall become Vested Options, provided a Termination of Service has not occurred before the applicable Vesting Date.  Vesting shall cease upon occurrence of a Termination of Service.  Vesting shall cease with respect to a number of Unvested Options determined by the Board or Committee in its sole discretion upon occurrence of a Substantial Reduction of Service.  If the calculation of Award Shares vested and available for purchase through exercise of Vested Options would result in a fraction, any fraction will be rounded to zero.

 

150,000 Option Shares shall vest when a majority of the members of the Board of Directors of the Company (other than (i) Participants; (ii) persons who have received Option Awards pursuant to the Plan (as defined in this Agreement); and (iii) persons who are officers or employees of the Company) determines by any reasonable means that the acquired technology described in U.S. Provisional Patent Application No. 61/583,531 entitled " A Pervaporation system for treating industrial produced water", filed on January 9, 2012 and any and all foreign counterpart patent applications currently existing or filed in the future will be commercialized by the Company, provided that if such determination does not occur on or before January 9, 2014, this Option shall terminate without any of the Option Shares becoming Vested Shares. Such determination shall be final and binding.

 

"Acceleration Event" means (i) a Change of Control followed within six months by an involuntary Termination of Service of Participant without Cause or (ii) a Corporate Reorganization followed within six months by an involuntary Termination of Service of Participant without Cause.

"Award Option" means the right to acquire Award Shares upon exercise of the Award Options.  Each Award Option represents the right to acquire upon exercise of the Award Option one Award Share (as adjusted for stock dividends, stock splits, reverse splits, recapitalizations ad similar events in accordance with the provisions of the Plan).

"Award Shares" means the aggregate number of Shares issued or issuable to Participant pursuant to this Agreement, which number of Shares is set forth on the facing page of this Agreement.

"Exercise Price" means the price per Award Share payable by Participant pursuant to this Agreement upon exercise of the Options as indicated on the facing page of this Agreement."

"Exercise Period" means the period of time during which Vested Options can be exercised, which period begins on the First Exercise Date and ends on the Exercise Termination Date.

5. "Exercise Termination Date" means the date on which any Award Option ceases to be exercisable.  Such Termination Date shall be the earlier of (i) the Expiration Date as shown on the facing page of this Award Agreement; (ii) ninety (90) days after occurrence of a Termination of Service of Participant with respect to the Company, or any Parent or Subsidiary, or (iii) ninety (90) days after occurrence of a Reduction in Service of Participant with respect to the Company, or any Parent or Subsidiary.

 

"Initial Vested Options" means Options that are Vested Options on the Grant Date and have never been subject to immediate termination upon a Termination of Service.

(b)           Disability.  If a Termination of Service or a Substantial Reduction of Service occurred and the cause of the Termination of Service or Substantial Reduction of Service was Participant's disability (within the meaning of Code §22(e)(3) as determined by the Board or Committee in its sole discretion), to the extent (and only to the extent) that Vested Options would have been exercisable by Participant when the Termination of Service or Substantial Reduction of Service occurred, such Vested Options may be exercised by Participant within one (1) year after when the Termination of Service or Substantial Reduction of Service occurred, but in no event later than the Expiration Date.

(a)           Exercise Agreement.  Vested Options shall be exercisable by delivery to the Company of (i) exercise agreement ("Exercise Agreement") executed by Participant in such form as may be approved or accepted by the Company, which shall set forth Participant's election to exercise this Vested Options with respect to some or all of the shares of Award Shares subject to Vested Options, the number of Award Shares subject to Vested Options being purchased, and (ii)  such other agreement (a "Restriction Agreement") executed by Participant at the request of the Company to comply with any restrictions imposed on the Award Shares subject to Vested Options or may from time to time be requested by investor or lender to the Company or by any buyer of the Company or any of its assets or by the holders of a majority of the shares of Common Stock of the Company (including, without limitation, vesting or performance-based restrictions, rights of the Company to re-purchase Award Shares acquired pursuant to the exercise of an Vested Options, voting restrictions, investment intent restrictions, restrictions on transfer, “first refusal” rights of the Company to purchase Award Shares acquired pursuant to the exercise of an Vested Options prior to their sale to any other person, "tag along" rights of other securities holders to sell securities to a purchaser of Award Shares from Participant, “drag along” rights requiring the sale of shares to a third party purchaser in certain circumstances, “lock up” type restrictions in the case of an initial public offering of the Company’s stock, restrictions or limitations that would be applied to shareholders under any applicable restriction agreement among the shareholders, and restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which any securities of the Company, a Parent or a Subsidiary is then listed and/or traded, and/or under any blue sky or state securities laws applicable to such Award Shares).  The Company may modify the required Exercise Agreement or Restriction Agreement at any time for any reason consistent with the Plan or may from time to time be requested by investor or lender to the Company or by any buyer of the Company or any of its assets or by the holders of a majority of the shares of Common Stock of the Company.  If the Participant receives a hardship distribution from a Code §401(k) plan of the Company, or any Parent or Subsidiary, this Vested Options may not be exercised during the six (6) month period following the hardship withdrawal (unless the Company determines that such exercise would not jeopardize the tax-qualification of such Code §401(k) plan).

 

(b)           Exercise Price.  Such Exercise Agreement shall be accompanied by full payment of the Exercise Price for the Award Shares being purchased.  Payment for the Award Shares being purchased may be made in U.S. dollars in cash (by check), or by delivery to the Company of a number of shares of Shares of the Company having an aggregate fair market value equal to the amount to be tendered (including a “cashless” or “net share” exercise), or a combination thereof.  In addition, this Vested Options may be exercised through a brokerage transaction following registration of the securities of the company under Section 12 of the Securities Exchange Act of 1934 as permitted under the provisions of Regulation T promulgated by the Federal Reserve Board applicable to cashless exercises.  Furthermore, if the Company so decides in its sole discretion, this Vested Options may be exercised as to a portion or all (as determined by the Company) of the number of Shares specified by any means permissible under the Plan.

 

(c)           Withholding Taxes.  Prior to the issuance of Award Shares upon exercise of this Vested Option, Participant must pay, or make adequate provision for, any applicable federal or state withholding obligations of the Company.  The Company may condition issuance of Award Shares upon exercise of this Option on Participant providing adequate proof of payment of all taxes.  Failure to provide such proof of payment within a reasonable time after request by the Company shall result in forfeiture of the Option and the Award Shares.  Participant may, to the extent allowed by the Company in the Company's sole discretion, provide for payment of withholding taxes upon exercise of the Vested Options by requesting that the Company retain Award Shares with a Fair Market Value equal to the minimum amount of taxes required to be withheld.  In such case, the Company shall issue the net number of Award Shares to Participant by deducting the number of Award Shares retained from the number of Award Shares exercised.

 

(d)           Issuance of Shares.  Provided that such Exercise Agreement and payment are in form and substance satisfactory to counsel for the Company, the Company shall cause the Award Shares purchased to be issued in the name of Participant or Participant's legal representative.  Participant shall not be considered a stockholder until such time as such Award Shares have been issued as noted on the stockholder register of the Company.

6. Unless the Company and the Participant otherwise agree in writing, any determination required under this Section shall be made in writing by the Company’s independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon the Participant and the Company for all purposes.  For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Section 280G and 4999 of the Code.  The Company and the Participant shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section.  The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.

Any certificate representing Award Shares shall bear legends substantially in the following form (in addition to, or in combination with, any legend required by applicable federal and state securities laws and agreements relating to the transfer and/or voting of the Company securities):

The Participant hereby agrees to execute and deliver, without unreasonable delay, any liability release, non-disparagement or other agreement requested by the Company, a Subsidiary or a Parent in connection with any Termination of Service.

The Participant hereby agrees to execute and deliver, without unreasonable delay, any agreement the Board of Directors of the Company determines is appropriate to facilitate an investment in, public offering by, sale, merger, acquisition, Change of Control or Corporate Reorganization of, the Company, a Parent or Subsidiary, including, without limitation, any voting agreement, form of proxy, first refusal or first offer agreement, "drag along" agreement, "tag along" agreement, "market standoff" or "lock-up" agreement, confidentiality agreement, non-competition agreement, non-solicitation agreement, liability release agreement, or assignment of intellectual property rights.

The Participant is purchasing the Award Shares for the Participant’s own account for investment only, and not with a view to, or for sale in connection with, any distribution of the Award Shares in violation of the Securities Act, or any rule or regulation under the Securities Act.

The Participant has had such opportunity as the Participant deems adequate to obtain from representatives of the Company such information as is necessary to permit the Participant to evaluate the merits and risks of the Participant’s investment in the Company.

 

The Participant has sufficient experience in business, financial and investment matters to be able to evaluate the risks involved in the purchase of the Award Shares and to make an informed investment decision with respect to such purchase.

 

The Participant can afford a complete loss of the value of the Award Shares and is able to bear the economic risk of holding such Award Shares for an indefinite period.

 

The Participant acknowledges that the Company has encouraged the Participant to consult the Participant’s own adviser to determine the tax consequences of acquiring the Award Shares at this time.

 

The Participant understands that (i) the Award Shares have not been registered under the Securities Act and are “restricted securities” within the meaning of Rule 144 under the Securities Act, (ii) the Award Shares cannot be sold, transferred or otherwise disposed of unless they are subsequently registered under the Securities Act or an exemption from registration is then available; (iii) in any event, the exemption from registration under Rule 144 will not be available for at least one year and even then will not be available unless a public market then exists for the Common Stock, adequate information concerning the Company is then available to the public, and other terms and conditions of Rule 144 are complied with; and (iv) there is now no registration statement on file with the Securities and Exchange Commission with respect to any stock of the Company and the Company has no obligation or current intention to register the Award Shares under the Securities Act.

 

The Company may condition exercise of Vested Options on Participant making such representations and agreements as the Company deems appropriate under applicable securities laws, rules and regulations.

Withholding Taxes.

 

The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise due to the Participant any federal, state or local taxes of any kind required by law to be withheld with respect to the purchase of the Award Shares by the Participant or the lapse of the Repurchase Right.

 

The Participant has reviewed with the Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement.  The Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents.  The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

 

If this Vested Options is an ISO, and if Participant sells or otherwise disposes of any of the Award Shares acquired pursuant to this ISO on or before the later of (a) the date two (2) years after the Grant Date, or (b) the date one (1) year after exercise of the ISO, with respect to the Award Shares to be sold or disposed, Participant shall and hereby agrees to immediately notify the Company in writing of such sale or disposition.  Participant acknowledges and agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant from any such early disposition by payment in cash or out of the current wages or earnings payable to Participant, and Participant agrees to remit same to Company upon request.  Participant also hereby agrees that Participant shall include the compensation from such early disposition in the Participant’s gross income for federal tax purposes.

 

 

Waiver.  Any provision for the benefit of the Company contained in this Agreement may be waived, either generally or in any particular instance, by the Board of Directors of the Company or Committee.

Pronouns.  Whenever the context may require, any pronouns used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns and pronouns shall include the plural, and vice versa.

Amendment, Waiver.  Except as provided in the Plan, this Agreement may be amended or modified or waived only by a written instrument executed by both the Company and the Participant.

 

Applicable Law.  Any dispute regarding the interpretation of this Plan or any Award granted under this Plan shall be submitted to the Board or the Committee, which shall review such dispute in accordance with the Plan.  The resolution of such a dispute by the Board or Committee shall be final and binding on the Company and Participant.  The laws of the state in which the Company is organized at the time of the dispute shall govern this Plan and all Awards granted under this Plan.  If the conflict of law rules of the state or organization would apply another state's laws, the parties agree that the laws of the state of organization shall still govern.  This Plan and the grant of Awards shall be subject to all applicable federal and state laws, rules, and regulations and to such approvals by any United States government or regulatory agency as may be required.  Participant shall have no rights under this Plan or any Award Agreement if such rights would cause Company to violate any such law, rule or regulation.

 

Dispute Resolution.  The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal and state courts located within the geographic boundaries of  the United States District Court for the Eastern District of North Carolina for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal and state courts located within the geographic boundaries of the United States District Court for the Eastern District of North Carolina, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.

 

Participant’s Acknowledgments.  The Participant acknowledges that the Participant: (i) has read this Agreement; (ii) has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this Agreement; (iv) is fully aware of the legal and binding effect of this Agreement; and (v) understands that the law firm of Ward and Smith, P. A., is acting as counsel to the Company in connection with the transactions contemplated by the Agreement, and is not acting as counsel for the Participant.